PublishedJune 23, 2023

USPTO Should Conduct Expedited Reviews for Discretionarily Denied PTAB Petitions

The USPTO’s invalidation of both patents involved in the ongoing legal battle between Intel and VLSI is the most recent development in a long and contentious debate among those who watch Patent Trial and Appeal Board (PTAB) proceedings closely. This decision is a positive sign for America’s patent system, but there is still more work to be done to fully undo the damage caused by the NHK-Fintiv rule. Intel got some delayed justice in this case, but that can’t be said for all parties who had petitions for PTAB review discretionarily denied. The VLSI case is only one example of the billions of dollars of damage potentially inflicted when the USPTO doesn’t fulfill its obligation to consider post-grant petitions on the merits. In light of this result, the USPTO should proactively re-examine the petitions for all petitioners denied post-grant review because of the flawed NHK-Fintiv rule.  Where appropriate, it should—at a minimum—sua sponte conduct ex parte reexaminations of the challenged patents.

For those who are not familiar with the case, VLSI, a non-practicing entity (NPE) and affiliate of Fortress Investment Group, acquired a broad portfolio of patents from a Dutch semiconductor company in 2019. Shortly after obtaining these patents, VLSI sued Intel in the Western District of Texas—a favorite venue for NPEs—and a jury awarded VLSI more than $2.1 billion in damages.

At the outset of the legal battle, Intel filed petitions for inter partes review (IPR) at the USPTO, which should have resulted in efficient, expert analysis of the patents in question. However, under previous USPTO Director Andrei Iancu’s NHK-Fintiv rule, and in violation of its statutory obligation to provide a merits decision, the PTAB declined the review petitions based on the co-pending Texas litigation without ever considering the case’s merits.  (It’s also important to note that a discretionary denial is always an admission that the USPTO believes that the petition met the threshold requirements of post-grant review.  If it didn’t, the agency would simply have denied on the merits.)

Eventually, PTAB took up review of the relevant patents when two unrelated entities, Patent Quality Assurance (PQA) and OpenSky, submitted petitions for IPR. They did not independently develop those petitions—instead, they used almost identical copies of Intel’s petitions, down to using the same expert witnesses.  Given that there was no concurrent litigation at that time, the PTAB granted review of both patents. After a controversy in which Director Vidal decided that PQA and OpenSky had abused the IPR process and had acted improperly toward both VLSI and Intel, the proceedings were allowed to continue with Intel as the lead petitioner.

It is important to note that, while the PQA and OpenSky petitions were nearly identical to the Intel petitions, their petitions were assessed on the merits rather than discretionarily denied based on the Fintiv rule. VLSI’s patents have now received the review they should have received when Intel requested it.  After that review, they were invalidated, but absent OpenSky and PQA, Intel might have been on the hook for more than $2 billion based on patents that the USPTO now agrees are not valid. 

In light of this case, the USPTO must now protect against both new economic harms inflicted by the Fintiv rule and address the potential harms by its prior application.  To protect against future harms, the USPTO should decide in its current rulemaking to completely eliminate the Fintiv rule in favor of simply addressing the merits.  (More on that in a future post.)  But that leaves in place the hundreds of Fintiv denials already issued where the petitioner never had the USPTO look at the merits.

Following the designation of Fintiv as a precedential case, the percentage of cases in which parallel litigation was cited as a reason to deny institution increased significantly, from 24.7% to 50.6%. Moreover, the number of discretionary denials due to parallel litigation accounted for approximately 38% of decisions analyzing NHK-Fintiv between October 2020 and March 2021, as revealed by a USPTO report.  

We already know that IPR, when accessible and functioning properly, works and helps catalyze economic growth. One study from this March found that reducing discretionary denials would result in an increase of $482.1 million in gross product over the next 10 years.  While the Intel-VLSI denials might have been among the most harmful, that doesn’t mean those other decisions didn’t also result in American innovators being forced to give money to hedge funds and NPEs instead of spending it on innovation.

While reviving each petition may be beyond the scope of the USPTO’s authority, there is an alternative.  The Director can, on their own initiative, review all of the denied petitions and, under 35 U.S.C. § 303, order ex parte reexamination of a patent.  To ensure that prior discretionary denials have not unduly harmed American companies, the USPTO should engage in a full review of denied petitions and, where appropriate, convert the petition into an ex parte reexamination.
It is crucial that every party denied review under Fintiv have their petitions reviewed. The USPTO has an obligation to make sure that invalid patents which they declined to review aren’t still around to be used against innovative, productive companies.

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

More Posts

Congress Wants to Revive Patents but May Strangle Innovation and Damage Health Care Access Instead

This post, written by Wayne Brough, initially appeared in the R Street’s Real Solutions Blog. Patent eligibility, or the fundamental question of what is patentable, is currently under congression...

CCIA Senior Counsel Joshua Landau Testifies To Congress

In case you missed it, I testified to the House Judiciary Committee's IP Subcommittee last week about whether the output of AIs should receive patent and/or copyright protection. The hearing is avail...

Tackling Patent Trolls In Foxboro

A new lawsuit in Massachusetts proves that even NFL teams are not safe from baseless accusations from patent trolls. While the New England Patriots are usually concerned with defending their home turf...

Subscribe to Patent Progress

No spam. Unsubscribe anytime.